INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On October 15, 2002, RF Micro Devices, Inc. (RF Micro) entered into an
agreement to acquire Resonext Communications, Inc. (Resonext), a privately held
company providing complete, highly integrated silicon complementary
metal-oxide-semiconductor (CMOS) wireless local area network (WLAN) solutions
for 802.11a and multi-band (802.11a/b/g) platforms. The acquisition of Resonext
would expand RF Micro's total addressable market, complement RF Micro's growing
presence in 802.11b products and leverage RF Micro's expertise in multi-standard
power amplifiers (PAs). RF Micro has agreed to issue $133.0 million in stock,
subject to a collar on RF Micro's stock price between $6.00 and $9.50 per share,
for all the outstanding shares of capital stock of Resonext, including the
shares issuable upon exercise of outstanding warrants and employee stock
options. The number of shares to be issued by RF Micro will be determined when
the transaction is closed (using an average price based on a trailing 20-trading
day period ending two days before closing). The minimum number of shares to be
issued by RF Micro will be 14.000 million (equivalent to $9.50 per share) and
the maximum number of shares will be 22.167 million (equivalent to $6.00 per
share). The transaction is subject to the approval of Resonext's shareholders
and other closing conditions and is expected to close during RF Micro's third
fiscal quarter ending December 31, 2002.
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
RF Micro anticipates that as a result of the acquisition, the combined
company will incur direct costs related to the business combination ranging from
approximately $5.0 million to $6.0 million. These direct costs will be accounted
for as part of RF Micro's purchase price allocation.
The following unaudited pro forma combined financial statements give
effect to RF Micro's acquisition of Resonext as a purchase transaction. The
unaudited pro forma combined financial statements are based on the respective
historical consolidated financial statements and the accompanying notes of RF
Micro and Resonext. RF Micro reports its financial results on a fiscal year
basis ending March 31. Resonext reports its financial results on a calendar year
basis ending December 31. The unaudited pro forma combined balance sheet assumes
that the acquisition took place on June 30, 2002 and combines RF Micro's June
30, 2002 unaudited consolidated balance sheet with Resonext's June 30, 2002
unaudited consolidated balance sheet. The unaudited pro forma combined
statements of operations assume that the acquisition took place as of the
beginning of the periods presented. RF Micro's unaudited consolidated statement
of operations for the first quarter ending June 30, 2002 has been combined with
Resonext's unaudited consolidated statement of operations for its second quarter
ending June 30, 2002. RF Micro's audited consolidated statement of operations
for the fiscal year ended March 31, 2002 has been combined with Resonext's
audited consolidated statement of operations for the year ended December 31,
2001. RF Micro uses a 52- or 53-week fiscal year ending on the Saturday closest
to March 31 of each year, and the first fiscal quarter of each fiscal year ends
on the Saturday closest to June 30; however, in this report RF Micro's fiscal
year is described as ending on March 31 and the first quarter of each fiscal
year is described as ending on June 30.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
The unaudited pro forma combined financial statements are based on the
assumptions set forth in the notes to such statements. The unaudited pro forma
adjustments made in connection with the development of the unaudited pro forma
information have been made solely for purposes of developing such unaudited pro
forma information for illustrative purposes necessary to comply with the
disclosure requirements of the Securities and Exchange Commission (SEC). The
unaudited pro forma combined financial statements do not purport to be
indicative of the results of operations for future periods or the combined
financial position or the results that actually would have been realized had the
entities been a single entity during these periods.
RF Micro does not expect any additional tax benefits as a result of the
transaction as each entity is currently in a net operating loss position and any
such benefits would be fully offset by a valuation allowance. As a result, there
is no estimated tax effect recorded in the unaudited pro forma adjustments.
These unaudited pro forma combined financial statements should be read
in conjunction with historical consolidated financial statements and the related
notes thereto of RF Micro and Resonext.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
(In thousands)
RESONEXT
RF MICRO COMMUNICATIONS
AS OF JUNE 30, AS OF JUNE 30, PRO FORMA PRO FORMA
2002 2002 ADJUSTMENTS NOTES COMBINED (1)
---------- -------------- ------------- -------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 172,839 $ 39,895 $ - $ 212,734
Short-term investments 177,979 - - 177,979
Accounts receivable, net 53,031 - - 53,031
Recoverable income tax 6,329 - - 6,329
Inventories 48,119 - - 48,119
Other current assets 6,097 210 - 6,307
---------- ---------- --------- ---------
Total current assets 464,394 40,105 - 504,499
Property and equipment, net 226,205 2,789 - 228,994
Intangible assets, net 11,297 - 25,402 4, 5 36,699
Goodwill 34,525 - 54,567 4 89,092
Other non-current assets 3,912 105 - 4,017
---------- --------- --------- ---------
TOTAL ASSETS $740,333 $ 42,999 $ 79,969 $863,301
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,871 $ 1,218 $ - $ 20,089
Accrued liabilities 20,437 2,919 5,500 2 28,856
Current obligations under capital leases 2,338 - - 2,338
--------- --------- --------- ---------
Total current liabilities 41,646 4,137 5,500 51,283
Long-term debt, net 294,646 - - 294,646
Obligations under capital leases, less current 20 - - 20
maturities
Other long-term liability 11,093 3 - 11,096
--------- --------- --------- ---------
Total liabilities 347,405 4,140 5,500 357,045
Shareholders' equity:
Preferred stock, no par value; 5,000 shares
authorized; no shares issued and outstanding - 35 (35) -
Common stock, no par value; 500,000 shares
authorized; (RFMD: 168,340 shares; 190,507 on a
pro forma combined basis) 280,838 5 127,435 4, 6 408,278
Additional paid-in capital 64,665 68,792 (63,232) 3 70,225
Deferred compensation (18,634) - (5,560) 3 (24,194)
Accumulated other comprehensive loss, net of tax (7,099) - - (7,099)
Retained earnings 73,158 (29,973) 15,861 4, 7 59,046
--------- --------- --------- ---------
Total shareholders' equity 392,928 38,859 74,469 506,256
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 740,333 $ 42,999 $ 79,969 $ 863,301
========= ======= ======== =========
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands)
RF MICRO DEVICES RESONEXT
THREE MONTHS COMMUNICATIONS
ENDED JUNE 30, THREE MONTHS PRO FORMA PRO FORMA
2002 ENDED JUNE 30, 2002 ADJUSTMENTS NOTES COMBINED (1)
------------------- -------------------- ------------------ -------- -----------------
Revenue:
Product sales $ 103,704 $ - $ - $ 103,704
Engineering revenue 238 - - 238
--------- --------- --------- ---------
Total revenue 103,942 - - 103,942
Operating costs and expenses:
Cost of goods sold 62,504 - - 62,504
Research and development 23,051 4,209 1,747 3, 5 29,007
Marketing and selling 8,414 300 - 8,714
General and administrative 4,200 519 - 4,719
Other operating expenses 742 - - 742
--------- --------- --------- ---------
Total operating costs and expenses 98,911 5,028 1,747 105,686
--------- --------- --------- ---------
Income (loss) from operations 5,031 (5,028) (1,747) (1,744)
Other income (expense):
Interest income 1,868 117 - 1,985
Interest expense (4,496) (31) - (4,527)
Other, net (17) - - (17)
--------- --------- --------- ---------
Income (loss) before income taxes 2,386 (4,942) (1,747) (4,303)
--------- --------- --------- ---------
Income tax expense 37 - - 37
--------- --------- --------- ---------
Net income (loss) $ 2,349 $ (4,942) $(1,747) $ (4,340)
========== ========== ========== ==========
Net income (loss) per share :
Basic $ 0.01 $ (0.02)
Diluted $ 0.01 $ (0.02)
Weighted average shares outstanding used in per share calculation:
Basic 167,938 21,240 6 189,178
Diluted 174,529 21,240 6 189,178
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands)
RF MICRO RESONEXT
FISCAL YEAR ENDED COMMUNICATIONS
MARCH 31, CALENDAR YEAR ENDED PRO FORMA PRO FORMA
2002 DECEMBER 31, 2001 ADJUSTMENTS NOTES COMBINED (1)
------------------ ------------------- ------------ ------- ---------------
Revenue:
Product sales $ 367,387 - - $ 367,387
Engineering revenue 1,921 - - 1,921
---------- ---------- ---------- ----------
Total revenue 369,308 - - 369,308
Operating costs and expenses:
Cost of goods sold 248,965 - 248,965
Research and development 74,445 12,671 6,988 3, 5 94,104
Marketing and selling 28,993 696 - 29,689
General and administrative 14,224 2,030 - 16,254
Other operating expenses 14,085 - - 14,085
Impairment of long-lived assets 6,801 - - 6,801
---------- ---------- ---------- ----------
Total operating costs and expenses 387,513 15,397 6,988 409,898
---------- ---------- ---------- ----------
Loss from operations (18,205) (15,397) (6,988) (40,590)
Other income (expense):
Interest income 12,166 743 - 12,909
Interest expense (17,195) (240) - (17,435)
Other, net (4,179) - - (4,179)
---------- ---------- ---------- ----------
Loss before income taxes (27,413) (14,894) (6,988) (49,295)
---------- ---------- ---------- ----------
Income tax benefit (6,829) - - (6,829)
---------- ---------- ---------- ----------
Net loss $ (20,584) (14,894) (6,988) $ (42,466)
========== ========== ========== ==========
Net loss per share:
Basic $ (0.12) $ (0.23)
Diluted $ (0.12) $ (0.23)
Weighted average shares outstanding used in per share calculation:
Basic 165,827 21,240 6 187,067
Diluted 165,827 21,240 6 187,067
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. PERIODS COMBINED
RF Micro's unaudited consolidated balance sheet as of June 30, 2002 has
been combined with Resonext's unaudited consolidated balance sheet as of June
30, 2002. RF Micro's financial results are reported on a fiscal year basis
ending March 31. Resonext's financial results are reported on a calendar year
basis ending December 31. RF Micro uses a 52- or 53-week fiscal year ending on
the Saturday closest to March 31 of each year and, the first fiscal quarter of
each year ends on the Saturday closest to June 30; however, in this report RF
Micro's fiscal year is described as ending on March 31 and the first quarter of
each fiscal year is described as ending on June 30.
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
RF Micro's unaudited consolidated statement of operations for the first
quarter ended June 30, 2002 has been combined with Resonext's unaudited
consolidated statement of operations for the second quarter ended June 30, 2002
and excludes Resonext's unaudited consolidated statement of operations for the
first quarter ended March 31, 2002. Resonext reported sales of $0.0 million and
net loss of $4.7 million for its first quarter ended March 31, 2002. RF Micro's
audited consolidated statement of operations for the fiscal year ended March 31,
2002 has been combined with Resonext's audited consolidated statement of
operations for the year ended December 31, 2001.
The periods combined for purposes of presenting the unaudited pro forma
combined statements of operations are not necessarily indicative of the periods
expected to be combined for purposes of RF Micro's Annual Report on Form 10-K
for the year ended March 31, 2003, which is expected to be filed with the SEC in
June 2003.
2. DIRECT COSTS OF BUSINESS COMBINATION
RF Micro estimates that as a result of the acquisition the combined
company will incur direct costs of the business combination ranging from
approximately $5.0 million to $6.0 million. The unaudited pro forma adjustment
is estimated at $5.5 million. These costs consist of investment banking, legal,
accounting, filings with regulatory agencies, financial printing and other
related costs. The direct costs of the business combination will be included in
RF Micro's purchase price allocation in accordance with the Financial Accounting
Standards Board (FASB) Statement of Financial Standards No. 141, "Business
Combinations". The unaudited pro forma combined balance sheets give effect to
such direct costs as if they had been incurred as of June 30, 2002.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
3. DEFERRED COMPENSATION
In accordance with the FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" (FIN 44), RF Micro will
record the intrinsic value, measured as the difference between the grant price
and fair market value on the acquisition consummation date, of unvested options
and unvested common shares assumed in the acquisition as deferred stock
compensation. Deferred stock compensation, is preliminarily estimated at an
aggregate of $5.6 million, will be recorded as a separate component of
shareholders' equity and will be amortized over the vesting term of the related
options and shares.
Unaudited pro forma adjustments for amortization of deferred
compensation are estimated to be on a quarterly basis of $0.7 million and an
annual basis of $3.0 million. The deferred compensation will impact income
(loss) in the periods immediately subsequent to the acquisition and
progressively eliminate over the vesting periods; therefore, the estimated
effect of these purchase adjustments on reported results of operations are as
follows: (in thousands)
DEFERRED
COMPENSATION
FISCAL YEAR AMORTIZATION
------------------- ---------------
2003 $ 705
2004 3,001
THEREAFTER 1,854
---------------
TOTAL $ 5,560
===============
The unaudited pro forma combined balance sheets give effect to such
charges as if they had been incurred as of June 30, 2002, and the unaudited pro
forma combined statements of operations give effect to such charges as if the
transaction had occurred at the beginning of the interim and annual periods
presented.
4. PURCHASE PRICE
The estimated aggregate purchase price of the Resonext acquisition is
$132.9 million, consisting of 21.24 million shares of common stock, warrants and
vested stock options at an estimated at a value of $6.00 per share ($127.4
million), and approximately $5.5 million of direct acquisition cost. The
deferred compensation related to the unvested options and unvested common shares
to be assumed in the acquisition are estimated at $5.6 million and is not a
component of the purchase price in accordance with FIN 44 (Note 3).
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
4. PURCHASE PRICE (CONTINUED)
The estimated purchase price of $132.9 million has been preliminarily
allocated to the assets acquired and liabilities assumed as follows (in
thousands):
Total purchase price $ 132,940
Total assets $ 42,999
Identifiable intangible assets 1,882
Technology 23,520
Total liabilities (4,140)
In-process R&D 14,112
--------------------
Total allocated $ 78,373
--------------------
Resulting goodwill $ 54,567
====================
The acquisition will be accounted for using the purchase method of
accounting. The total cost of the acquisition has been preliminarily allocated
to the assets that will be acquired and liabilities that will be assumed based
upon their respective fair values as determined through preliminary appraisals
and internal estimates. The actual allocation of the purchase price, and the
resulting effect on income, may materially differ from the unaudited pro forma
amounts included herein once the acquisition is closed and an independent firm
has completed the final valuation analysis.
5. INTANGIBLE AMORTIZATION
RF Micro expects to record approximately $25.4 million of acquired
intangible assets, with estimated average useful lives of seven years for the
technology intangibles and three years for the remaining intangibles in
connection with the business combination. Unaudited pro forma adjustments for
amortization of such intangibles are estimated to be $1.0 million on a quarterly
basis and $4.0 million on an annual basis.
The unaudited pro forma combined balance sheets give effect to such
charges as if they had been incurred as of June 30, 2002, and the unaudited pro
forma combined statements of operations give effect to such charges as of the
beginning of the interim periods ending June 30, 2002 and the annual periods
ending December 31, 2001 and March 31, 2002.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
6. EXCHANGE OF STOCK
RF Micro has agreed to issue $133.0 million in stock, subject to a
collar on RF Micro's stock price between $6.00 and $9.50 per share, for all the
outstanding shares of capital stock of Resonext, including the shares issuable
upon exercise of outstanding warrants and employee stock options. The number of
shares to be issued by RF Micro will be determined when the transaction is
closed (using an average price based on a trailing 20-trading day period ending
two days before closing). The minimum number of shares to be issued by RF Micro
will be 14.000 million (equivalent to $9.50 per share) and the maximum number of
shares will be 22.167 million (equivalent to $6.00 per share). The transaction
is subject to the approval of Resonext's shareholders and other closing
conditions and is expected to close during RF Micro's third fiscal quarter
ending December 31, 2002.
The unaudited pro forma basic net loss per share assumes vested shares
and options to be issued in connection with the acquisition were outstanding as
of the beginning of the period presented and represents an estimated 21.240
million shares at a purchase price of $6.00 per share. The unaudited pro forma
dilutive net loss per share excludes the potential dilutive effect of unvested
shares and options to be issued in connection with the acquisition representing
a total of approximately 0.927 million dilutive shares because the effect of
their inclusion will be anti-dilutive based on the unaudited pro forma combined
losses for each of the periods presented. (Note 4)
7. IN-PROCESS RESEARCH AND DEVELOPMENT
As a result of the acquisition, RF Micro estimates that it will record
a one-time charge of a preliminarily estimated amount of $14.1 million for
purchased in-process research and development related to development projects
that have not reached technological feasibility, have no alternative future use,
and for which successful development is uncertain.
The unaudited pro forma combined balance sheets give effect to such
charges as if they had been incurred as of June 30, 2002, but the effects of
these costs have not been reflected in the unaudited pro forma combined
statements of operations as they are nonrecurring in nature.